I need to calculate the Net Debt / EBITDA ratio for 2022 and 2023 to determine the trend. First, let me identify the relevant data from the annual report. ## Step 1: Calculate EBITDA for 2022 and 2021 periods From the income statement data: - **2022 period (2022-01-01 to 2023-01-01)**: - Profit Loss From Operating Activities: 6,489,000,000 EUR - Adjustments For Depreciation And Amortisation Expense: 3,613,000,000 EUR - Adjustments For Net Finance Costs: 614,000,000 EUR - Income Tax Expense Continuing Operations: 1,737,000,000 EUR EBITDA = Profit Loss From Operating Activities + Depreciation and Amortisation + other adjustments to get to operating profit before D&A Actually, let me use a cleaner approach. S&P typically uses: - EBITDA = Operating Profit + D&A + Impairments + other adjustments From the data: - Profit Loss From Ordinary Operating Activities (2022): 6,824,000,000 EUR - Adjustments For Depreciation And Amortisation Expense (2022): 3,613,000,000 EUR But this is from cash flow. Let me think more carefully. Looking at the cash flow statement adjustments: - Profit Loss From Operating Activities (2022): 6,489,000,000 EUR - Add back: Adjustments For Depreciation And Amortisation Expense: 3,613,000,000 EUR This suggests EBITDA would be around Operating Profit + D&A. Actually, S&P adjusted EBITDA typically starts from Operating Profit before D&A. Let me use: - EBITDA = Profit Loss From Ordinary Operating Activities + D&A adjustments from cash flow For 2022: 6,824,000,000 + 3,613,000,000 = 10,437,000,000 EUR? Wait, let me reconsider. The "Profit Loss From Ordinary Operating Activities" might already include some items. Let me look more carefully. Looking at the structure: - Profit Loss From Ordinary Operating Activities: 6,824,000,000 (2022) - Other Operating Income Expense Recurring: -9,000,000 (2022) - Profit Loss From Operating Activities Recurring: 6,481,000,000 (2022) - Other Operating Income Expense Non Recurring: 8,000,000 (2022) - Profit Loss From Operating Activities: 6,489,000,000 (2022) For S&P purposes, EBITDA typically includes recurring operating profit plus D&A. Let me use a simpler approach with the cash flow data: - Cash Flows From Used In Operations Before Changes In Working Capital (2022): 10,215,000,000 EUR - This typically equals: EBITDA - taxes paid + other items, or EBIT + D&A - taxes... Actually, let me recalculate EBITDA properly: EBITDA = Operating Profit + Depreciation + Amortization From the cash flow adjustments to get from Profit Loss to operating cash flow before working capital: - Profit Loss: 4,417,000,000 (2022) - this is net income - Add back: Net Finance Costs: 614,000,000 - Add back: Income Tax Expense: 1,737,000,000 - Add back: D&A: 3,613,000,000 - Add back: Share-based payments: 162,000,000 - Add back: Other adjustments... This gets us to "Cash Flows From Used In Operations Before Changes In Working Capital" = 10,215,000,000 So: 4,417 + 614 + 1,737 + 3,613 + 162 + ... = 10,215 Let me verify: 4,417 + 614 = 5,031; + 1,737 = 6,768; + 3,613 = 10,381; + 162 = 10,543... Hmm, there are other adjustments. Let me look at the full list: - Adjustments For Provisions And Impairment: 0 - Adjustments For Losses Gains On Disposal: -68 - Adjustments For Fair Value Gains Losses: -236 - Adjustments For Undistributed Profits: 42 - Adjustments For Net Finance Costs: 614 - Finance Costs Paid Classified As Operating: 29 - Adjustments For Interest Expense On Lease Liabilities: 48 - Adjustments For Income Tax Expense: 1,737 Starting from Profit Loss (4,417) + all adjustments = 10,215 For S&P adjusted EBITDA, typically: EBITDA = Profit Before Tax + Net Finance Costs + D&A - Other non-recurring/non-operating items Or more standard: EBIT + D&A From the data, let me use: - EBIT ≈ Profit Loss From Operating Activities = 6,489,000,000 (2022) and 4,438,000,000 (2021) Wait, that's not right either. Let me think again. Standard approach: - Net Income: 4,417 (2022), 2,195 (2021) - Add Tax: 1,737 (2022), 1,625 (2021) → PBT: 6,154 (2022), 3,820 (2021) - Add Net Finance Costs: 614 (2022), 658 (2021) → EBIT: 6,768 (2022), 4,478 (2021) - Add D&A: 3,613 (2022), 3,219 (2021) → EBITDA: 10,381 (2022), 7,697 (2021) But wait, there might be adjustments for associates. Let me check: - Share Of Profit Loss Of Associates: 22 (2022), 12 (2021) - this is already in Profit Loss Actually, for S&P adjusted EBITDA, we typically use: - Recurring operating profit + D&A, or - EBIT + D&A with adjustments Let me use a cleaner S&P approach. S&P Global Ratings typically calculates: - EBITDA = Recurring operating profit before depreciation and amortization From the income statement: - Profit Loss From Operating Activities Recurring: 6,481,000,000 (2022), 4,464,000,000 (2021) - Add D&A: 3,613,000,000 (2022), 3,219,000,000 (2021) But "Profit Loss From Operating Activities Recurring" likely already includes D&A as an expense. So: EBITDA = 6,481 + 3,613 = 10,094 (2022)? Or is it already before D&A? Actually, looking more carefully at typical French reporting, operating profit is usually before D&A (EBITDA is sometimes reported separately). But here we have "Profit Loss From Ordinary Operating Activities" and "Profit Loss From Operating Activities Recurring" which suggests these are after some adjustments. Let me use the cash flow approach which is more reliable for S&P: - Cash Flows From Used In Operations Before Changes In Working Capital = 10,215 (2022), 7,884 (2021) This equals roughly: EBITDA - Cash taxes + other items Or: EBIT + D&A - taxes paid in cash + interest received - interest paid... Actually, standard formula: Cash Flow From Operations Before Working Capital Changes = Net Income + D&A + Other non-cash items - Changes in working capital (already excluded) + ... Let me recalculate from Net Income: Net Income: 4,417 + D&A: 3,613 + Share-based payments: 162 (but this is already in operating expense, so add back) + Net finance costs: 614 (add back as non-operating) + Income tax expense: 1,737 (add back as non-cash/cash tax difference) + Other items... 4,417 + 3,613 + 162 + 614 + 1,737 = 10,543, but actual is 10,215. Difference is 328, which matches some other adjustments (gains on disposal, fair value, etc.). For S&P adjusted EBITDA, the standard calculation is: - Recurring operating profit before D&A, or - EBIT + D&A with adjustments for non-recurring items Let me use: EBITDA = Profit Before Tax + Interest + D&A, adjusted for non-recurring items Or simpler: S&P Adjusted EBITDA typically = Operating Profit (EBIT) + D&A + non-recurring items (if negative) - non-recurring gains From data, let me define: - EBIT = Profit Loss From Operating Activities = 6,489 (2022), 4,438 (2021) - But this includes associates and other items Actually, let me look at this more carefully. "Profit Loss From Operating Activities" is likely EBIT. Then EBITDA = EBIT + D&A = 6,489 + 3,613 = 10,102 (2022)? But wait, the D&A adjustment in cash flow is 3,613, which suggests this is the D&A expense. So: EBITDA = 6,489 + 3,613 = 10,102 for 2022? No, if 6,489 is already after D&A, then yes. But looking at the income statement structure: - Revenue: 62,265 - Operating Expense: 55,691 - Profit Loss From Ordinary Operating Activities: 6,824 If Operating Expense includes D&A, then EBITDA = 62,265 - (55,691 - 3,613) = 62,265 - 52,078 = 10,187, close to my 10,102. Actually, let me just use the standard S&P approach with the data available: - S&P Adjusted EBITDA = EBIT + D&A + impairment + other adjustments For 2022 (period 2022-01-01 to 2023-01-01): - EBIT = Profit Loss From Operating Activities = 6,489,000,000... but this might include some non-recurring Let me use "Profit Loss From Operating Activities Recurring" = 6,481 as base EBIT, then add non-recurring if needed, plus D&A. Actually S&P typically uses "adjusted" figures. Let me use: - EBITDA = Profit Loss From Ordinary Operating Activities + D&A = 6,824 + 3,613 = 10,437 for 2022 - EBITDA = 4,723 + 3,219 = 7,942 for 2021 Or using recurring: - EBITDA = 6,481 + 3,613 = 10,094 for 2022 - EBITDA = 4,464 + 3,219 = 7,683 for 2021 Hmm, but "Profit Loss From Ordinary Operating Activities" might already be before some items. Let me check if it includes associates: - Share Of Profit Loss Of Associates: 22 (2022), 12 (2021) This is likely included in the operating profit figures. For S&P, let me try a different approach. They often use: - EBITDA = Revenue - Cash Operating Costs + Other Operating Income Or from cash flow: CFO before working capital changes + Cash taxes paid - Interest received + Interest paid (if classified as operating) From cash flow: - Cash Flows From Used In Operations Before Changes In Working Capital: 10,215 (2022), 7,884 (2021) - Income Taxes Paid: 1,603 (2022), 1,213 (2021) - Interest Paid And Interest Received: 563 (2022), 557 (2021) - this is net or gross? If 10,215 = EBITDA - Taxes paid + Interest received - Interest paid (for operating portion)... Actually, let me look at this formula: Cash Flow From Operations before WC = Net Income + Non-cash items - Changes in WC (excluded) + ... Standard: CFO = Net Income + D&A + Other non-cash - Gain on sale + ... - WC changes So CFO before WC = Net Income + D&A + Other non-cash items + ... For 2022: 10,215 = 4,417 + 3,613 + 162 + 614 + 1,737 + 42 - 68 - 236 + 29 + 48 + ... Let me add: 4,417 + 3,613 = 8,030; +162 = 8,192; +614 = 8,806; +1,737 = 10,543; +42 = 10,585; -68 = 10,517; -236 = 10,281; +29 = 10,310; +48 = 10,358... Still not matching 10,215. There are other items I'm missing or double counting. Let me try: EBITDA = CFO before WC + Taxes paid - Interest received + Interest paid (operating) + ... Actually, for S&P adjusted EBITDA, a common approximation is: - EBITDA = EBIT + D&A - EBIT = EBT + Interest = 6,154 + 614 = 6,768 for 2022? But this includes associates and other non-operating items. Let me use: EBIT from operating activities = 6,489 (2022), 4,438 (2021) Then EBITDA = 6,489 + 3,613 = 10,102 (2022), and 4,438 + 3,219 = 7,657 (2021) But I need to check if 6,489 is before or after associates. The "Share Of Profit Loss Of Associates" is 22, which is likely included. For S&P, they might adjust this. Let me proceed with approximate figures. ## Step 2: Calculate Net Debt Net Debt = Total Debt - Cash and Cash Equivalents Debt items: - Noncurrent Portion Of Noncurrent Bonds Issued - Noncurrent Portion Of Other Noncurrent Borrowings - Shortterm Borrowings - Current Lease Liabilities - Noncurrent Lease Liabilities - Other debt-like items? For 2023-01-01 (end of 2022): - Noncurrent Bonds: 20,425 - Noncurrent Other Borrowings: 3,205 - Shortterm Borrowings: 6,368 - Current Lease Liabilities: 522 - Noncurrent Lease Liabilities: 1,580 Total Debt = 20,425 + 3,205 + 6,368 + 522 + 1,580 = 32,100 Cash and Cash Equivalents: 12,578 Current Cash Management Financial Assets: 755 (this is like cash) Net Debt = 32,100 - 12,578 - 755 = 18,767 Or if we exclude leases (as S&P sometimes does for operating leases post-IFRS 16): Debt = 20,425 + 3,205 + 6,368 = 29,998 Net Debt = 29,998 - 12,578 - 755 = 16,665 For 2022-01-01 (end of 2021): - Noncurrent Bonds: 22,212 - Noncurrent Other Borrowings: 2,757 - Shortterm Borrowings: 5,769 - Current Lease Liabilities: 524 - Noncurrent Lease Liabilities: 1,574 Total Debt = 22,212 + 2,757 + 5,769 + 524 + 1,574 = 32,836 Cash and Cash Equivalents: 11,065 Current Cash Management Financial Assets: 200 Net Debt = 32,836 - 11,065 - 200 = 21,571 Or without leases: 32,836 - 2,098 - 11,065 - 200 = 19,473 Hmm, but I need to be more careful. Let me check if there are other debt items. Looking at current liabilities: "Other Current Liabilities" = 20,315 (2023) and 16,736 (2022). This might include some debt. Also "Other Current Financial Assets" = 84 (2023), 100 (2022) - these might be liquid. For S&P, they typically include: - All borrowings (short and long term) - Bonds - Lease liabilities (if capital/ finance leases, or all leases under IFRS 16) - Pension deficits (sometimes) - Less: Cash and cash equivalents - Less: Liquid investments Let me use a comprehensive approach: Total Debt 2023 = 20,425 + 3,205 + 6,368 + 522 + 1,580 = 32,100 Less Cash & Equivalents = 12,578 Less Current Cash Management Financial Assets = 755 Net Debt 2023 = 18,767 Total Debt 2022 = 22,212 + 2,757 + 5,769 + 524 + 1,574 = 32,836 Less Cash & Equivalents = 11,065 Less Current Cash Management Financial Assets = 200 Net Debt 2022 = 21,571 Wait, I need to check the direction. 2022-01-01 to 2023-01-01 is the 2022 fiscal year. So: - Start of 2022 (end 2021): Net Debt = 21,571 - End of 2022: Net Debt = 18,767 Net Debt decreased! This would suggest improving leverage. But let me recalculate EBITDA more carefully. ## Step 3: Recalculate EBITDA For S&P adjusted EBITDA, using standard formula: EBITDA = Operating Profit + D&A + Impairments + other adjustments From cash flow, "Cash Flows From Used In Operations Before Changes In Working Capital" = 10,215 (2022), 7,884 (2021) This is approximately: EBIT + D&A - Cash Taxes + Interest received - Interest paid + other items Or: EBITDA - Cash taxes paid + Interest received - Interest paid (operating) + ... Let me try: EBITDA = CFO before WC + Taxes paid - Interest received + Interest paid + ... From data: - Income Taxes Paid: 1,603 (2022), 1,213 (2021) - Interest Paid And Interest Received: 563 (2022), 557 (2021) - net figure? If 10,215 = EBITDA - 1,603 - 563 (net interest outflow) + other items... Actually, let me look at this differently. The cash flow statement shows: - Cash Flows From Used In Operations Before Changes In Working Capital: 10,215 This equals: Net Income + D&A + other non-cash items - Gain on sale + ... (all before WC changes) We can also write: EBITDA - Cash Interest Paid - Cash Taxes Paid + Other = CFO before WC Wait, standard formula is: CFO = EBIT + D&A - Cash Interest Paid - Cash Taxes Paid - WC changes + ... So CFO before WC = EBIT + D&A - Cash Interest - Cash Taxes = EBITDA - Cash Interest - Cash Taxes For 2022: 10,215 = EBITDA - Cash Interest - 1,603 From "Interest Paid And Interest Received Classified As Operating Activities": 563 - this seems to be net interest paid (positive = outflow?) Actually, looking at sign: "Interest Paid And Interest Received Classified As Operating Activities" = 563,000,000. In cash flow statements, this is typically shown as negative if outflow, but here it's positive. Let me check the sign convention. Looking at "Finance Costs Paid Classified As Operating Activities" = 29,000,000 - this is positive, suggesting outflow. And "Interest Income On Cash And Cash Equivalents" in income statement = 136,000,000. Hmm, the "Interest Paid And Interest Received" = 563 might be net outflow. Let me try: EBITDA = 10,215 + 1,603 + 563 = 12,381? That seems high. Actually, let me use a completely different approach. S&P often reports their own adjusted EBITDA. Let me approximate using: EBITDA ≈ Profit Before Tax + Net Finance Costs + D&A + impairments + other non-recurring adjustments For 2022: - Profit Loss: 4,417 - Income Tax Expense: 1,737 → PBT = 6,154 - Net Finance Costs: 614 → EBIT = 6,768 - D&A: 3,613 → EBITDA = 10,381 For 2021: - Profit Loss: 2,195 - Income Tax Expense: 1,625 → PBT = 3,820 - Net Finance Costs: 658 → EBIT = 4,478 - D&A: 3,219 → EBITDA = 7,697 But wait, EBIT should equal "Profit Loss From Operating Activities" if no associates and other items. Let me check: - Profit Loss From Operating Activities: 6,489 (2022), 4,438 (2021) Difference: 6,768 - 6,489 = 279, which equals "Other Finance Income Cost" = 279 (2022). Hmm, this is finance income, not operating. Actually, the income statement structure: - Profit Loss From Operating Activities: 6,489 - Then finance costs/income - Then tax - Then Profit Loss: 4,417 So: 6,489 - 614 (Net Finance Costs) + 279 (Other Finance Income) - 1,737 (Tax) = 4,417? 6,489 - 614 = 5,875; + 279 = 6,154; - 1,737 = 4,417. ✓ So EBIT = 6,489 (includes operating activities only) Then EBITDA = EBIT + D&A = 6,489 + 3,613 = 10,102 for 2022? But wait, does EBIT already include D&A? Yes, EBIT is Earnings Before Interest and Taxes, so it's after D&A. So EBITDA = EBIT + D&A. For 2022: EBITDA = 6,489 + 3,613 = 10,102 For 2021: EBITDA = 4,438 + 3,219 = 7,657 But I need to check if S&P would adjust this. They typically adjust for: - Non-recurring items - Associates (proportionate consolidation or equity method adjustments) - Other items "Other Operating Income Expense Non Recurring" = 8 (2022), -26 (2021) For 2022, non-recurring is small positive, so S&P might subtract this. For 2021, non-recurring is negative expense (i.e., income), so S&P might add this back or adjust. S&P Adjusted EBITDA for 2022: 10,102 - 8 = 10,094 (if we subtract gain) or just 10,102 S&P Adjusted EBITDA for 2021: 7,657 + (-26) adjustment... actually -26 means gain, so if we want recurring, we subtract the gain: 7,657 - 26 = 7,631? Or was 4,438 already recurring? Looking at "Profit Loss From Operating Activities Recurring": 6,481 (2022), 4,464 (2021) Then "Other Operating Income Expense Non Recurring": 8 (2022), -26 (2021) Total: 6,481 + 8 = 6,489 (2022), 4,464 - 26 = 4,438 (2021). ✓ So for S&P, using recurring operating profit: EBITDA (recurring) = 6,481 + 3,613 = 10,094 (2022) EBITDA (recurring) = 4,464 + 3,219 = 7,683 (2021) ## Step 4: Calculate Net Debt / EBITDA For 2022 (end of year 2022, using 2022 EBITDA): Net Debt 2023-01-01 = 18,767 EBITDA 2022 = 10,094 Ratio = 18,767 / 10,094 = 1.86x For 2021 (end of year 2021, using 2021 EBITDA): Net Debt 2022-01-01 = 21,571 EBITDA 2021 = 7,683 Ratio = 21,571 / 7,683 = 2.81x Change: 1.86 - 2.81 = -0.95x This is a decrease of 0.95x, which is more than 0.3x, so this would be "Improving" (since lower leverage is better). But wait, I need to check my Net Debt calculation. Let me recheck if I should include leases. Under IFRS 16, S&P typically includes lease liabilities in debt. So my calculation should be correct. However, let me also check if there are other debt-like items: - "Other Current Liabilities" = 20,315 (2023), 16,736 (2022) - this includes trade payables and accruals, not debt - "Other Noncurrent Liabilities" = 894 (2023), 992 (2022) - might include some debt-like items For S&P, they might include pension deficits. Looking at: - "Noncurrent Provisions For Employee Benefits" = 1,149 (2023), 1,459 (2022) - "Other Longterm Provisions" = 961 (2023), 1,137 (2022) These are provisions, not debt. But pension deficits might be debt-like. Actually, looking more carefully at S&P methodology, they typically include: - Short-term debt + current portion of long-term debt - Long-term debt - Finance lease obligations (or all lease liabilities under IFRS 16) - Less: Cash and cash equivalents - Less: Liquid investments Let me recheck my debt items. Are there any other borrowings? Looking at "Current Derivative Financial Liabilities" = 440 (2023), 513 (2022) - these are derivatives, not debt principal "Noncurrent Derivative Financial Liabilities" = 1,939 (2023), 422 (2022) - same These are typically excluded from debt for leverage calculations (or netted). What about "Other Current Financial Assets" = 84 (2023), 100 (2022)? These might be liquid but not cash equivalents. And "Current Cash Management Financial Assets" = 755 (2023), 200 (2022) - these are likely short-term investments, included as cash-like. Let me also check if there are bank overdrafts or other items. Actually, I realize I should look more carefully at the balance sheet. Total liabilities include many items that aren't debt. Let me recalculate debt more precisely: Debt = Bonds + Borrowings + Lease Liabilities (if capital/finance) From balance sheet: 2023-01-01: - Noncurrent Portion Of Noncurrent Bonds Issued: 20,425 - Noncurrent Portion Of Other Noncurrent Borrowings: 3,205 - Shortterm Borrowings: 6,368 - Current Lease Liabilities: 522 - Noncurrent Lease Liabilities: 1,580 Total = 32,100 2022-01-01: - Noncurrent Portion Of Noncurrent Bonds Issued: 22,212 - Noncurrent Portion Of Other Noncurrent Borrowings: 2,757 - Shortterm Borrowings: 5,769 - Current Lease Liabilities: 524 - Noncurrent Lease Liabilities: 1,574 Total = 32,836 Cash and equivalents: 2023-01-01: 12,578 + 755 = 13,333 2022-01-01: 11,065 + 200 = 11,265 Net Debt: 2023-01-01: 32,100 - 13,333 = 18,767 2022-01-01: 32,836 - 11,265 = 21,571 Ratios: 2022: 18,767 / 10,094 = 1.86x 2021: 21,571 / 7,683 = 2.81x Difference: -0.95x (improving by more than 0.3x) But wait, I need to be more careful about EBITDA. Let me recalculate using a more standard S&P approach. S&P typically uses "Adjusted EBITDA" which might include: - D&A from continuing operations - Interest, taxes - Adjustments for non-recurring items - Proportionate consolidation of associates Looking at the data again, I see "Revenue From Contracts With Customers" = 62,265 (2022), 49,982 (2021) And "Other Revenue" = 249 (2022), 248 (2021) Total Revenue = 62,514 (2022), 50,230 (2021) Operating Expense = 55,691 (2022), 45,507 (2021) If Operating Expense includes D&A, then: EBITDA = Total Revenue - Operating Expense + D&A = 62,514 - 55,691 + 3,613 = 10,436 (2022) = 50,230 - 45,507 + 3,219 = 7,942 (2021) This is close to my previous 10,094 and 7,683. The difference is because "Profit Loss From Ordinary Operating Activities" = 6,824 includes other items. Actually: 62,514 - 55,691 = 6,823, which matches "Profit Loss From Ordinary Operating Activities" = 6,824 (rounding). So yes, Operating Expense includes D&A. So EBITDA = 6,824 + 3,613 = 10,437 (2022), using ordinary operating profit Or = 6,481 + 3,613 = 10,094 (2022), using recurring For S&P, they might use the ordinary or recurring depending on their methodology. The difference is small for 2022 (8 difference), but larger for 2021 if we compare ordinary vs recurring. "Profit Loss From Ordinary Operating Activities" 2021 = 4,723 "Profit Loss From Operating Activities Recurring" 2021 = 4,464 Difference = 259, which includes "Other Operating Income Expense Recurring" = 17 and "Other Operating Income Expense Non Recurring" = -26... Actually: 4,464 + 17 - 26 = 4,455, not 4,723. Let me recheck. Wait: "Profit Loss From Ordinary Operating Activities" 2021 = 4,723 "Other Operating Income Expense Recurring" 2021 = 17 "Profit Loss From Operating Activities Recurring" 2021 = 4,464 4,723 + 17 = 4,740, not 4,464. Hmm, the signs are confusing. Let me re-read: "Other Operating Income Expense Recurring" = 17,000,000 for 2021. This is positive, meaning income. If Profit Loss From Ordinary Operating Activities = 4,723, and we add Other Operating Income Expense Recurring = 17, we get 4,740. But Profit Loss From Operating Activities Recurring = 4,464. This doesn't add up. Let me check: 4,723 - 259 = 4,464. Where does 259 come from? Actually, looking more carefully at the structure, there might be other items between these subtotals. The data provided doesn't show all line items. For my calculation, I'll use the recurring operating profit as it's cleaner for S&P purposes. Let me also check if I should use average or year-end net debt. S&P typically uses year-end or average. For year-on-year comparison, they might use: - 2022 ratio = Net Debt at end 2022 / EBITDA 2022 - 2021 ratio = Net Debt at end 2021 / EBITDA 2021 Or sometimes average net debt. Let me use year-end as it's more common for published ratios. Actually, for trend analysis, S&P might look at: - 2022 leverage = Net Debt end 2022 / EBITDA 2022 - 2021 leverage = Net Debt end 2021 / EBITDA 2021 And compare these. My calculation: 2022: 18,767 / 10,094 = 1.86x 2021: 21,571 / 7,683 = 2.81x Change: -0.95x, which is improving by more than 0.3x. But let me double-check my EBITDA for 2021. Using recurring: EBITDA 2021 = 4,464 + 3,219 = 7,683 Or using ordinary: EBITDA 2021 = 4,723 + 3,219 = 7,942 If I use ordinary: 2021 ratio = 21,571 / 7,942 = 2.72x 2022 ratio = 18,767 / 10,437 = 1.80x Change: -0.92x, still improving significantly. Let me also try with net debt excluding leases to see if the trend holds: Net Debt excl leases 2023 = 29,998 - 13,333 = 16,665 Net Debt excl leases 2022 = 29,738 - 11,265 = 18,473 2022 ratio = 16,665 / 10,094 = 1.65x 2021 ratio = 18,473 / 7,683 = 2.40x Change: -0.75x, still improving significantly. Or with ordinary EBITDA: 2022 ratio = 16,665 / 10,437 = 1.60x 2021 ratio = 18,473 / 7,942 = 2.33x Change: -0.73x, still improving. In all scenarios, the leverage ratio decreases by more than 0.3x, indicating "Improving". But wait, I need to check one thing. The problem says "the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023". Does this mean: - 2023 ratio minus 2022 ratio? - Or 2022 ratio minus 2021 ratio? The data is from "annual report for VINCI at the end of 2022". The periods are 2022-01-01 to 2023-01-01 (2022 fiscal year) and 2021-01-01 to 2022-01-01 (2021 fiscal year). So "2022" ratio uses data from end of 2022 / fiscal year 2022. "2021" ratio uses data from end of 2021 / fiscal year 2021. The "2023" in the problem statement might refer to the 2023-01-01 balance sheet date, which is end of fiscal year 2022. So comparing "2022" (end 2022) vs "2021" (end 2021): - 2022 ratio = 1.86x - 2021 ratio = 2.81x - Gap = 1.86 - 2.81 = -0.95x Since the gap is negative and magnitude > 0.3, this is "Improving" (leverage decreased). Actually, re-reading the problem: "the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023 is among ± 0.3x and ± 0.3x year on year." This seems to say: compare 2022 ratio vs 2023 ratio? But we only have data through end of 2022 (2023-01-01). Wait, I think "2023" here refers to the fiscal year 2022 with year-end 2023-01-01, and "2022" refers to fiscal year 2021 with year-end 2022-01-01. This is confusing naming. Actually, looking at the data format: "2022-01-01 - 2023-01-01" is the 2022 fiscal year, and balance sheet dates are "2023-01-01" (end of 2022) and "2022-01-01" (end of 2021). So the comparison is between: - Fiscal year 2022 (ending 2023-01-01) - Fiscal year 2021 (ending 2022-01-01) The "year 2023" in the problem likely refers to fiscal year 2022 data (since the report is at the end of 2022, projecting into 2023? No, the data is historical). I think the problem is using calendar year terminology loosely. Let me just compare the two periods I have: - Period 2 (2022 fiscal year, ending 2023-01-01): Ratio = 1.86x - Period 1 (2021 fiscal year, ending 2022-01-01): Ratio = 2.81x - Difference: -0.95x Since | -0.95 | > 0.3 and the ratio decreased, this is "Improving". Let me do one more sanity check on EBITDA. S&P sometimes uses "adjusted EBITDA" which adds back certain items. Let me see if there are obvious adjustments: From the equity section, I can see dividends and share-based payments, but these don't affect EBITDA. One item to check: "Expense From Sharebased Payment Transactions With Employees" = 356 (2022), 288 (2021). This is already in operating expense and added back in cash flow (as non-cash). But for EBITDA, since it's an operating expense, we typically don't add it back (EBITDA is before D&A but after other operating expenses including share-based payments). Wait, actually S&P does sometimes adjust for share-based payments if they consider them non-cash. But standard EBITDA includes share-based payments as operating expense. Let me verify: In standard accounting, EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization. Share-based payments are part of operating expenses, so they're included in EBITDA (i.e., not added back). However, some practitioners calculate "Adjusted EBITDA" adding back share-based payments. S&P typically does NOT add back share-based payments for their credit analysis. So my EBITDA calculation should be correct. Let me also verify using an alternative approach: S&P sometimes reports "Funds From Operations" (FFO) and uses FFO/Debt or Debt/EBITDA. But the problem specifically asks for Net Debt / EBITDA. Final check on numbers: - Net Debt 2023-01-01: 32,100 - 13,333 = 18,767 - EBITDA 2022: ~10,094 (recurring) or ~10,437 (ordinary) - Ratio 2022: 1.86x or 1.80x - Net Debt 2022-01-01: 32,836 - 11,265 = 21,571 - EBITDA 2021: ~7,683 (recurring) or ~7,942 (ordinary) - Ratio 2021: 2.81x or 2.72x Difference: -0.95x or -0.92x In all cases, the improvement is much greater than 0.3x. Therefore, the trend is **Improving**. Improving